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Excel Online Structured Activity: Tightening Credit Terms Kim Mitchell, the new credit manager of the Vinson Corporation, was alarmed to find that Vinson sells on
Excel Online Structured Activity: Tightening Credit Terms Kim Mitchell, the new credit manager of the Vinson Corporation, was alarmed to find that Vinson sells on credit terms of net 90 days while industry-wide credit terms have recently been lowered to net 30 days. On annual credit sales of $2.7 milion, Vinson currently averages 95 days of sales in accounts receivable. Mitchell estimates that tightening the credit terms to 30 days would reduce annual sales to $2,575,000, but accounts receivable would drop to 35 days of sales and the savings on investment n them should more than overcome any loss in profit Assume that Vinson's variable cost ratio is 75%, taxes are 40% and the interest rate on funds invested in receivables is 18% The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions above Open spreadsheet Assuming a 365-day year, calculate the net income under the current policy and the new policy. Do not round intermediate calculations. Round your answers to the nearest dollar Current policy: New policy: Should the change in credit terms be made? The firm should change its credit terms. The firm should not change its credit terms
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